New FICO Mortgage Score

Jul 25, 2012 by Kurt

A banker explains credit to a would-be borrower.

On July 10 Fair Isaac Corporation—the company that created and sells the widely used FICO credit score—announced a new product targeting mortgage lending. Using information mined by the data company CoreLogic and included in its CoreScore™ Credit Report, the new, exhaustively named FICO® Mortgage Score Powered by CoreLogic® will capture a wider range of consumer behavior than traditional credit reports.

What’s in the New FICO Mortgage Score?

As quoted by CreditCards.com, Mark Munzenburger of credit counseling agency GreenPath Debt Solutions says this on the new mortgage score: “Consumers really need to be aware that, more than ever, everything they do with respect to their finances is somehow tracked and kept in a database.” Fair Isaac says its new mortgage score will reflect, in addition to traditional credit score data, “property transaction data, landlord/tenant data, borrower-specific public data, and other alternative credit data.”

Examples of your behavior that could be reflected in the FICO mortgage score include:

• Applying for a payday loan
• Child support late payment history
• Rent payment history
• Short-term installment loan payment history

What’s the Upshot for Consumers?

Unsurprisingly, Fair Isaac says the new and improved score will be a win-win for lenders and borrowers:

“For a top-20 lender processing 300,000 applications a year, adopting this new score could translate into 3,900 more loans approved every year along with a net financial benefit of $14.5 million. As such, it not only provides a more complete and predictive evaluation of a consumer’s credit risk profile, but it can empower lenders to better mitigate risk and approve more loans for more consumers.” – from the Fair Isaac announcement of its new FICO mortgage score

Mr. Munzenburger of GreenPath isn’t so giddy: “So when you’ve got folks who have struggled with on-time payments or because of unemployment or disability, when you really kind of boil it down, this report will magnify those problems. It will probably make it a little bit harder for people to rebuild that credit quicker.”

Clearly the new FICO score could help consumers with a thin traditional credit history. If you’ve never been late on your rent and have repaid a payday loan on time, those positive factors should be reflected in the FICO mortgage score but probably not in your traditional credit report or score. And according to FICO, that you’ve taken out payday loans is not considered a negative in the new score, provided you’ve not been delinquent in repayment. (Separate topic: Please get off the very costly payday loan bandwagon!)

However, if your traditional credit file doesn’t have much data in it and the new data included in the FICO mortgage score is mostly negative, your chances of being granted credit will take a hit.

Same Rules Apply

You have the same rights to dispute negative, inaccurate information in the CoreScore Report—which feeds the FICO mortgage score— as you’ve always had with traditional credit reports. Also, you can—and you definitely should—obtain one free copy a year of your CoreScore Report and review it for accuracy.

What Do You Think?

Would you expect the new FICO mortgage score to both 1) make mortgage loans available to consumers who might otherwise not be approved, and 2) decrease bad loan rates? Do you think you’ll be helped or hurt by the new score?

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